School District Vending Contract Survey
THE PROBLEM:
The monetary and human costs of obesity and nutrition-related diseases are growing at an alarming rate and will quickly overshadow the state's resources to deal with such a health crises. Dr. Eduardo Sanchez, Texas Commissioner of Health, states, "We estimate that overweight-obesity in Texas adults costs at least $9 billion a year, including $6 billion in direct health care expenses. It's clear that the physical health of Texas will determine its fiscal health." A resolution by Senator Eddie Lucio was passed during the last legislative session, which recognized that the state is facing an epidemic of overweight and obese children. Such children are at a much higher risk for serious, long-term health problems, including Type II diabetes, cardiovascular disease, gall bladder, liver and heart disease and cancer. This resolution requested the Lieutenant Governor and the Speaker of the House to create a joint interim committee to study the nutritional content and quality of foods and beverages served to public school children, including food service meals, a la carte foods, competitive foods and vending machines. An open records request was sent in May 2003 to all school districts in Texas in order to provide data and information for this important study and to determine the extent of school vending contracts.
VENDING CONTRACT SURVEY:
The total number of districts surveyed was 1,256 and 932 (74.2 percent) responses have been received to date. Attendance in the responding school districts is 3,755,960 and represents 88.2 percent of the 4,259,864 students in Texas. Elementary school (K-6 grades) attendance is 2,254,008 (53 percent) and junior high (7-8 grades) is 641,958 (15 percent), while high school (9-12 grades) attendance is 1,363,898 represents 32 percent of the students in the state. Since vending operations are aimed primarily at high school students, the number of beverages sold and sales revenues come from less than one third of all students in the state. Approximately 51 percent (2,182,223) of all students in Texas are eligible for free or reduced price meals.
THE NUMBERS:
- Of the 932 districts, 487 (52.3%) have exclusive vending contracts.
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307 (63%) of the districts contract with Coca-Cola.
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75 (15%) of the districts contract with Pepsi.
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66 (14%) contract with Dr. Pepper.
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39 (8%) contract with other
companies
It is important to note that 71 percent of school districts with more than 1,000 students have exclusive vending contracts, with some requiring the installation of multiple vending machines in all schools, including elementary schools. Approximately 37 percent of the districts with fewer than 1,000 students have vending contracts.
THE DOLLARS:
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The total annual revenue reported from these vending contracts in Texas is estimated to be $54,180,182.
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Very large school districts (100,000+ students) receive an average of $2.7 million per year from their vending contract operations.
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Large districts (40,000 ? 100,000 students) receive an average of almost $1 million per year.
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Medium sized districts (20,000 ? 40,000) receive an average of about $500,000 per year.
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School districts with between 5,000 and 20,000 students may receive up to $150,000 per year.
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Even small districts with fewer than 5,000 students on average may receive $25,000 per year.
These figures represent cash receipts and the value of non-cash benefits annualized over the terms of the contracts. The revenue figures are conservative estimates of cash payments and projections of commissions earned based on interpretations of financial information contained in the contracts. The non-cash benefits include funds for scoreboards and marquees with annual maintenance (as much as $500,000 for one district); scholarships; software; merchandise such as shirts, school supplies, book covers, athletic programs, sports bags, sunglasses, clocks, trophies, plaques, soft drinks and tanks of pre-mix for soft drinks, cups, coolers, and hats; equipment for booster clubs; movie tickets; sponsorship of athletic events and tournaments; fountain drink dispensers, etc. All of this merchandise is prominently branded with the company logos. Students are surrounded by advertising and brand logos on school campuses and even in classrooms throughout the school day.
Some company and school officials have acknowledged that the true purpose of these contracts is to develop brand loyalty in students at an early age. Exclusive vending contracts allow unlimited advertising access to their students. Research indicates that it is difficult for young children to understand and resist the message of advertising aimed directly at them. In some industries a brand may represent as much as 25 percent of a company's market value.
The funds and other benefits received from these contracts are not regulated and may be used at the discretion of local school district officials. This is not "free" money because it comes directly from the pockets of students and the family income of their parents.
SAMPLE CONTRACT TERMS AND PROVISIONS:
Some contracts require that mostly 20 oz. containers be sold, except in the teacher's lounge where 12 oz. products are allowed. Vending machines must be located in high student traffic areas. The highest commissions are for 20 oz. carbonated products. If the contract is breached or terminated for any reason then the school must reimburse the bottler for lost revenues. The bottling company is allowed complete freedom to advertise throughout the school and use the school name in other advertising-such as radio. No other beverage products are allowed anywhere on school premises including athletic events, school carnivals, etc. In many contracts, the bottler/vendor is identified as the "advertiser." Financial terms vary greatly from school to school, with some schools receiving as much as $20 per student in cash ($1,000,000 per year) and other districts receiving both cash and non-cash benefits.
IMPACT OF SCHOOL DISTRICT VENDING ON SCHOOL FOOD SERVICE OPERATIONS:
The Comptroller's office estimated that there may be between 26,000 and 39,000 vending machines being operated in Texas schools. There is no actual information available on sales from these vending machines at this time, but based on national industry figures the machines would generate considerably more than the $54 million reported in this survey. The study further estimated that statewide food service operations potentially lose $60 million per year to competitive food sales. The loss of federal meal reimbursement ($3.25 average per participating student per day) resulting from substituting colas and snacks for a school meal is not known, but the true net loss to school food service operations would be much higher. During the 2001 school year, school food service operations in 738 of the 1,256 school districts operated at a deficit. The total deficit was $23.7 million and these funds had to be subsidized from other school district sources.
ADDITIONAL INFORMATION:
The survey does not contain information on how funds received from vending contracts are spent. School district financial accounting rules state that revenues from vending contracts and sales should be recorded as local revenue and audited on an annual basis. However, direct contract revenues are usually coded as "other resources" and commission sales as "general or other income" and co-mingled with other local fund sources in the districts general fund accounts. Some districts may record these funds in "principals funds" or "enterprising accounts" with little or no supporting documentation. The use of these funds may also be undocumented, very difficult to track and may or may not be audited.
Much more data and information will be necessary to properly analyze the full extent of school vending operations and the resulting effects on children's health.
DISCLAIMER:
The information contained in this chart was complied solely from documents provided by the school districts in response to a Public Information Request. Therefore, TDA cannot guarantee the accuracy or completeness of this information. Circumstances may have changed since this information was compiled. You may wish to contact the individual district if you have specific questions about this information. All survey information and estimates are based on information received as of the morning of August 25, 2003.
Survey Results:
Tab Seperated Text
Excel Format
 Statewide Obesity Taskforce: Strategic Plan for the Prevention of Obesity in Texas (February 2003)
A report from the Statewide Obesity Taskforce
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